I have read an argument or two that American “capitalism” has more in line with feudalism than the capitalism spelled out by the grandaddy of economics, Adam Smith. The more I investigate the argument, the more I’m inclined to believe it. Take wealth extraction from markets, which is also known as “rent seeking”.
Rent-seeking definition from Wikipedia:
Rent-seeking is a concept in public choice theory as well as in economics, that involves seeking to increase one’s share of existing wealth without creating new wealth. Rent-seeking results in reduced economic efficiency through misallocation of resources, reduced wealth-creation, lost government revenue, heightened income inequality, and potential national decline.
Apple’s 10-K SEC form claimed that in 2018 it “had approximately 132,000 full-time equivalent employees” and “4,745,398,000 shares of common stock were issued and outstanding as of October 26, 2018”.
Apple reported that it paid its shareholders dividends four times in 2018:
- Nov 1, 2018 $.73
- Jul 31, 2018 $.73
- May 1, 2018 $.73
- Feb 1, 2018 $.63
For a total of $2.82 per share of AAPL paid in the 2018 calendar year.
Using these numbers this means that $13,382,022,360 worth of dividends were paid in 2018. Had Apple chosen to pay only half of that (a mere six and a half billion dollars) to its shareholders who provided, capital but no labor, and gave the other half to its “approximately 132,000 full-time equivalent employees”, they would have each had an increase in annual pay of roughly $50,689.48. During my time as a retail employee of Apple, but annual salary was below that dollar amount the entire time.
Although this may come off as a write up that has it out for Apple, please do not let that be your take away. Apple, as a publicly held company, has a legal obligation to maximize its profits to shareholders. This write up is using a company that I am familiar with and have an, overall, positive opinion of to illustrate a problem with the American economy. My argument is that the excess of profits that are allocated to the investors is wealth extraction from the market, and my defense that, instead, allocating those monies to labor is a proper allocation of resources that will generate new wealth and government income (as the middle and poor seem to be better at paying their share of taxes than the rich) and reduce income inequalities.
The very well cited Wikipedia article Income inequality in the United States shows the trends of income inequalities in the American economy between lowest, middle, and highest incomes. If you ever feel the dissonance between increasing American economy and production but stagnant wages - this is where the money from the “great economy” has been going.
I’m a firm believer in the words put forth by Franklin Roosevelt in his statement on the National Industrial Recovery Act (emphasis mine):
In my Inaugural I laid down the simple proposition that nobody is going to starve in this country. It seems to me to be equally plain that no business which depends for existence on paying less than living wages to its workers has any right to continue in this country. By “business” I mean the whole of commerce as well as the whole of industry; by workers I mean all workers, the white collar class as well as the men in overalls; and by living wages I mean more than a bare subsistence level-I mean the wages of decent living.